Pension fund readiness for new climate rules under question

The UK's pension watchdog, The Pensions Regulator, has uncovered a disturbing lack of readiness for the DWP's upcoming ESG regulations. In a survey of the 100 largest schemes, 80% were found to have not taken steps to integrate climate change issues in their investment strategy statement.

Master trusts came out on top with 59% taking account of climate change compared with 42% of large schemes, 26% of medium schemes and 11% of the small and micro schemes used for auto-enrollment.

Three primary reasons for not considering climate change were that:

• not felt to be relevant to their scheme (mentioned by 35%).
• not required to do this (15%) and
• climate change came lower than other priorities (14%).

With just two months to go, pension schemes face a strict timetable for setting out their investment policies in relation to “financially material considerations”, which includes voting, climate change ESG factors. From 2020, trustees are required to publicly disclose their policies and subsequent implementation.

Speaking in July this year on the launch of the UK’s Green Finance Strategy, Charles Counsell, Chief Executive of The Pensions Regulator said: "Climate change is no longer simply a social responsibility issue. It is a core financial risk impacting broadly across business, the economy and markets. Climate change is a risk to long-term sustainability pension trustees need to consider when setting and implementing investment strategy, while many schemes are also supported by employers whose financial positions and prospects for growth are dependent on current and future policies and developments in relation to climate change. Tackling poor standards of governance and risk management in pensions are priorities for TPR and we welcome working together with other regulators to address these challenges for pension schemes."

To find out how Minerva can help with climate-related stewardship, please contact David Crum, Managing Director - Asset Owner Solutions. Email hello@minerva.info or call +44 (0)20 3009 0853.